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Senior Partner, Solicitor

Category: Law

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Experience: Solicitor with more than 30 years experience

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Hi,
A debt collection company has claimed they purchased

Customer Question

Hi,

A debt collection company has claimed they purchased an account where i owe x amount of money and now they are legally entitled to collect.

Since they purchased the account, they should have proof of purchase and be able to show a transaction for the account. So I requested it. They say they are unable to supply me with that information and further they have no legal obligation to do so.

Am I within my rights to demand proof of purchase by way of the amount transacted for the account to prove a)they actually have the account and b) if they have purchased it, so I can see the true amount.

Hi thanks for your question. Do you owe the debt? If so and if it is still recoverable then all they have to do is give you notice of assignment of the debt - but this should come from the creditor and you are obliged to pay the purchaser. If you have not had that then yes you are entitled to require proof of the assignment and if they want to sue you they will have to produce it. So you can ask for evidence of the assignment. tell them if they do not produce evidence of their right to the debt as requested you will tell the court in any proceedings and ask for costs. You are not entitled to see the detail of the sale itself if they can produce evidence of the assignment to them without it.

My understanding is. That a 'debt' can be settled for any amount the creditor is willing to accept. It's a 'note' promising to pay.

So the original creditor has accepted an amount of money from somebody else, they no longer have anything to do with it. They have settled the account to their satisfaction.

They could of offered it to me for whatever they sold it to this new company.

I have been 'notified' that the account has been passed on to this new company, they say they purchased it.

So logically, the assignment exists because of the purchase. If they can't prove the purchase of the account (which they've said they don't have that information) how can they claim the assignment is legitamate?

Further they threatened legal action on the basis that i refused to pay the debt. I haven't refused, 1) I've just asked for information that they are unwilling/unable to supply.

2) that it's not a 'debt'. They didn't lend me any money, the original creditor no longer has a claim. So they purchased a piece of paper in order to recieve more money than they paid for it. It is an asset, not a debt. It's no different from a product on the shelf in tesco.

I don't see any obligation to settle for what they claim it's worth when in actuality it's true value is significantly lower, the proof of that they are withholding, further I made no agreement with them.

I think you have misunderstood the position. The debt you owed to original creditor is an asset ( called a chose in action) of the creditor. They can sell that asset to someone else which is what they have apparently done.

It is correct that if a creditor accepts a payment in discharge of a debt whether it is part payment form the debtor or a payment from a third party that discharges the debt and the chose in action is extinguished but when a creditor sells a debt, they do not receive a payment in discharge but rather a payment to buy the right to debt. Usually at a significant discount to full value.

The right to pursue the debt has been passed to them and they can recover it unless it time barred or you have a defence for some reason.

You are however entitled to evidence that they have acquired the right to the debt unless the original creditor sent you notice of assignment. If the notice was only from the debt collector then you can ask for more if it was form the bank/credit card co etc then you cannot.

I made small payments to other companies several years ago, but within 6 years. I believe next year it will remove from my credit file. but nothing to the original creditor for over 6 years.

The difference between payment in discharge of a debt and selling a debt for someone else to chase seems arbitrary..? what is the actual distinction between the two?

If a letter came from the original creditor, again, why do I not have a right to see proof of sale/purchase?

If a letter said we have given assignment to a 3rd party to collect. Then I would not.

But the letter said, company x has purchased.. Since they've explicitly told me it's been purchased. Surely I have the right to see that?

If they can't prove it, then they on what basis can either company make that claim?

And if I am a party to an agreement which requires me to settle any money to the creditor, surely they should offer to settle it with me for the same amount as been offered to another company?

It doesn't seem fair or reasonable conduct.

you said:

"I think you have misunderstood the position. The debt you owed to original creditor is an asset ( called a chose in action) of the creditor. They can sell that asset to someone else which is what they have apparently done"

The debt owed to the original creditor and the amount chased by this new company are not the same thing. No monies will be returned to the original creditor, so it is purely an asset and why I say it has no been discharged.

When you incur a debt it is an obligation. To discharge the debt you or someone on you behalf has to discharge that obligation. Your creditor has a right - the right to receive whatever is paid in discharge of that obligation. That right is an asset just like a share in a company or a deposit with a building society or even a treasury stock- the fact that the price goes up and down does not alter the nominal value. Those assets confer on the holder the right to receive the benefit of the underlying obligation.

When a creditor sells a debt it is selling the benefit of the obligation under the debt. That has no effect on the underlying obligation. The debtor still owes the money and is still subject to the obligation. If the creditor believes the debtor may not pay or is not good for the money, then the creditor may well consider the value of the obligation to be less than its face value. Debt is frequently traded for more or less than its face value.

On the other hand the only way your obligation is discharged is by making payment - whether you make it or someone else makes it on your behalf - it has to be a payment from the debtor in discharge of its obligation.

It is perfectly legal for a creditor to sell the debt you owe. So far as the law is concerned you incurred the debt, you should pay it. the price the creditor was paid reflects the risk to the buyer and other factors. The buyer is doing it in the hope of profiting on the price he paid that is why certain agencies buy 'bad" debts

It may well have been open to you to offer below the nominal value to pay off the debt but presumably you did not do this and I imagine that the new owner did not buy your debt in isolation but as part of a book of old debts for a composite price.

If the original creditor served notice of assignment to the debt collection agent then that is legally binding upon you and they do not have to do anything else. That is the law I am afraid.

However if this debt is over 6 years old ( and is not a mortgage debt or something done under a deed) then it may be unenforceable most debts are statute barred after 6 years PROVIDED you have not acknowledged in writing that you owe the debt within the last 6 years and that you have not made any payment on account.

Its over 6 years old, I never made any written acknowledgement of it. A few companies in the past wrote to me for money.. I made one or two payments to them and originally it was a student account/overdraft. So I'm not sure if its statute barred?

"If the original creditor served notice of assignment to the debt collection agent then that is legally binding upon you and they do not have to do anything else. That is the law I am afraid"

They didn't simply serve notice of assignment. They said the account has been purchased.

That is a claim?

Surely any claim you make, you should be able to substantiate?

They had no need to mention it had been purchased if they could simply assign the debt to whoever they wanted.

Something is a-miss here.

If your simply explaining the law then ok, but it doesn't seem to make any sense.

"It is perfectly legal for a creditor to sell the debt you owe. So far as the law is concerned you incurred the debt, you should pay it. the price the creditor was paid reflects the risk to the buyer and other factors. The buyer is doing it in the hope of profiting on the price he paid that is why certain agencies buy 'bad" debts"

If the money is owed. Then it would make no sense for the original lender to sell it at a lower value, if the new company is only going to seek the same amount of money. It doesn't benefit the original lender in anyway. It simply penalises the debtor. Which should invalidate the assignment as that can be it's only intention. the creditor doesn't owe anything to the debt collection agency. it's simply a business trying to profit.

I am sorry if the law makes not sense to you Non the less the law about assignment of debts is clear and has been for a very long time.

It would in fact make no sense at all for a creditor to offer to settle a debt for less than face value completely voluntarily. It would encourage debtors not to pay. Commercially it makes perfect sense to sell of books of old debts. It passes on the recovery cost and allows someone else to compromise the debt if they see fit without the original creditor releasing it.

The fact is that all government debt, most bank debt and a significant proportion of other debt is traded in one way or another either on public markets or privately. Actually it is what currency is swell it is just a form of promissory note.

Turning to your particular debt.

If you received notice form the original creditor of the assignment then that is binding. Legally it amounts to a direction to you to discharge you debt by paying someone else. They can do that and it is enforceable unless the debt specifically said it was not assignable. IF the notice was not from the original creditor but from the debt collection company then you can ask for proof of their title to the debt. They cannot just demand payment without showing evidence of their right to the debt.

If you have made any payment within the last 6 years then the debt is not time barred until 6 years after a) the last payment; or if later b) the last time you acknowledged the debt in writing.

"It would in fact make no sense at all for a creditor to offer to settle a debt for less than face value completely voluntarily. It would encourage debtors not to pay. Commercially it makes perfect sense to sell of books of old debts. It passes on the recovery cost and allows someone else to compromise the debt if they see fit without the original creditor releasing it. "

A loss is a loss is a loss. unless you are trying to protect the status quo. Which essential is what is happening. Banks don't want people to refuse to pay in large numbers, because there is only so many people you can force to comply with your demands. it would be like a bank run, bring down the system. debt collection companies are the other ass cheek of the same backside, as galloway would say.

"The fact is that all government debt, most bank debt and a significant proportion of other debt is traded in one way or another either on public markets or privately. Actually it is what currency is swell it is just a form of promissory note."

Yes, the rehypothication of 'money'. If all money in circulation is created through debt (with interest), which it is. Then it is simply a matter of fact that not all of it can be paid back.

Back to my situation

The company have since made me an offer at 40% below what they originally wanted/claimed.

Do you have/ is there a link to a template letter for a counter offer?

Also, I may have missed it, but if someone makes a claim in writing to you, are they obliged to substantiate it should you request it?

hypothetically, if they took me to court, and I said, I was told the account was purchased and subsequently the assignment changed hands. So have asked for proof of purchase which would therefore make the assignment valid and it has not been provided. What would happen?

Hello my name is Alex and I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply as this is not an ‘on demand’ live service, but rest assured I will be giving your question my immediate attention upon return. There is no need to wait here, you will get an email when I reply.

I was not getting fed up only disappointed that I could not get the answer across in a way you understood.

Of course they have to prove their claim and in a court case produce evidence - if the creditor served notice and you did not accept that it had then they would have to prove that notice had been given. If they simply claim to be purchaser of the debt then they have to prove that by producing evidence of the assignment. Normally there is a master assignment with a schedule of the debts covered. The can probably "redact " i.e. not dislcose the price.

If you want to make a counter offer then you dimly write " without prejudice " at the heading of the letter and say I don't accept your offer but I will pay x in full settlement. If they agree then you confirm it in a letter that is not marked without prejudice.

Do not do that until you have confirmed whether the claim is time barred. IF you think it is time barred then you just respond denying any liability and saying in a any event the claim is time barred.

Ok, I understand what your saying, It's just difficult to differentiate from what may be your interpretation/opinion (and open to debate (obviously you know more than me)) and what is a matter of fact and should be accepted for what it is.

And I wouldn't blame you for being fed-up. I'm good at doing that to people..

"Do not do that until you have confirmed whether the claim is time barred. IF you think it is time barred then you just respond denying any liability and saying in a any event the claim is time barred."

When they first contacted me, I said I could not remember anything about it, it had been sometime ago.

They then sent me a letter with some screen prints of payments made to other debt collectors some time ago on it. But this isn't proof that the debt is not time barred, just that they have information that it is my account?

So what I shall do is:

1) ask them for proof that the debt is not statute barred or tell them I believe it is time barred

2)should they come back with a response proving it is still valid, ask them for proof of assignment

3) if i'm happy with all that, make them an offer using the terms you mentioned.

Finally question assuming I've understood all that.

Is there any merit in giving them a fixed period of time to respond to my letters or does it carry no weight? and if you don't mind, how would I phrase that at the end of a letter?

No do not ask them for proof it is not statute barred. until you have checked do not say anything that acknowledges the debt in any way. If you have not made a payment for 6 years just tell them a) you deny anything is due and even if it was it is now statute barred. Presumably the screen prints show when you allegedly made the previous payments.

Yes ask them for proof of the assignment.

You can put time limits but they carry no weight. If you are difficult it may deter them form suing but they may just have a process that they follow and will sue anyway after a certain period. If they refuse to support their claim tell them you will not respond further and they should stop harassing you.

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